APPLIED ECONOMICS-QUARTER 1

NAME OF STUDENT: GRADE/SECTION:

_Juliana Marie I. Yaneza_______ _12-Humility______________
TEACHER: DATE SUBMITTED:
_____________________________ _September 3, 2024_______ _

I. INTRODUCTORY CONCEPT
During the ancient times, there was already a way of exchanging goods and products.
Maybe you are familiar with the concept of barter system, wherein people look for goods that
they don’t have in exchange of the products they have. In present time, we use money in
exchange of goods or products. There is a market where buyers and sellers meet which
makes the market moves. The amount of goods and services that the consumers are willing
to purchase given a certain price is called a demand while the willingness of sellers to
produce and sell goods at various possible prices is called the supply.

Now, how can we balance the market so we can see that the price and quantity will
become stable. In economics, we have what we call the Equilibrium where it is the state in
which market supply and demand balanced each other, and as a result, prices become
stable.

The inverse relationship between price and quantity demanded of certain product can be
illustrated that a decrease in price of a particular product will make a product attractive to the
customers while price increases will make them less attractive. Thus, in the Law of Demand
where the price increases, the quantity demanded or the willingness to buy the product
decreases, holding other factors constant (ceterus paribus).
Applying the concept above, the table below shows the demand schedule for corn
and the demand curve representing points in the table.
Point Price Quantity
A 80 0 Interpretation:
B 60 100
At point A customer is unwilling to buy the
C
100 40 200
A (0,80) Demand corn for the price of P80.00 but he is
D
80 20 300 willingFigure 1 shows
to accept 400 that the demand
quantities curve
of the corn
E
60 0 400 generally descends. Similarly with
if it is free of charge at point E. the line in the
E (400,0) Law of Diminishing Marginal Utility. If Peter
TABLE
40 1. Demand Schedule for Corn likes to eat chocolates and as the day goes by
20 his fond of eating them lessens, thus his interest
Price of eating chocolate started to decline. This is a
Quantity
good example of the Law of Diminishing
100 200 300 400 Marginal Utility.
Figure 1.
Let us understand howDemand Curve
the Law of Demand works.

Ceterus Paribus (All things held constant)

As price ________, quantity demanded___________

As price ________, quantity demanded___________

Paradigm 1: Law
1 of Demand
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The Paradigm 1, explains that in the Law of Demand, an increase in price results to
a decrease in quantity demanded and a decrease in price results to an increase in quantity
demanded provided that all others things are held constant. Therefore, the relationship of
 .
Applying the concept of demand that if the price increases the demand of certain
product will decrease however, if the price falls, new buyers will enter the market and old
buyers are likely to buy more.

The following are certain reasons why people purchase more when the price is
falling:
1. INCOME EFFECT. He is able and willing to buy more because the product is
cheaper, his real income increases.
2. SUBSTITUTION EFFECT. When the commodity becomes cheaper, it tends to be
substituted wholly or partly for other commodities.
3. A commodity tends to be put into more uses or less urgent uses when it becomes
cheaper.

Thus, the proportionate change in price and quantity or the slope of demand can be
computed using the formula below:

FORMULA FOR SLOPE OF DEMAND: Let’s use the table 1 at Point A and B.
Change∈P P 2−P1
Change∈P P 2−P1 D= =
D= = Change∈Q Q2−Q1
Change∈Q Q2−Q1 60−80
Slope D=
P1−initial price 100−0
P2−final price −20
Slope D=
Q1−initial quantity 100
Slope D=−.20
Q2−final quantity
Slope D=¿ .20/¿

**The negative value of the slope explains the inverse relationship of price and quantity
demanded. **
A change in price determines the quantity demanded. There are other factors
however, which influence demand. This occurs when the demand curve is moved to the left
or to the right. An entirely different demand schedule is indicated by a shifting of demand.
This refers to the shifts in demand and its determinants.

The table below illustrates the different determinants, effects and examples.
Determinants Effect Example
Income An increase in income results to an An increase in income by 20% and you
increase in demand of normal increased your consumption for rice by
goods. 20%, then the rice for this consumer is
basic-normal.

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 An increase in income will also If there is a 20 percent increase in
result to an increase in demand of income and a 50% increase in meat
luxury normal goods and a consumption and a 50% decrease in
decrease in demand of inferior dried fish, then meat is a luxury normal
goods (goods that are being given- goods and dried fish is a an inferior
up). goods.
Taste and The demand curve can be shifted An example is if you prefer Valentine's
Preferences right when tastes and preferences day chocolates, roses and the growing
have changed provided all are Christmas demand for ham.
constant.
Price of related Substitute. If A and B are Diaper A has an original price of
goods like substitutes and price of A P100.00 per 12 pieces but when the
substitutes and increases, quantity demanded of B pandemic comes the price of Diaper A
complements will increase and if the price of A increases to P150.00. Thus, the
decreases, the quantity demanded customer has decided to use Diaper B
of B will decrease. as substitute to Diaper A which costs
only P100.00 same as the original price
of Diaper A.

Complements. If A and B are Increasing the price of slice bread will

complements, and the price of A lower the demand for peanut butter.
increased, then the quantity (Complement).
demanded of B will decrease.
Changes in The speculation of consumers H1N1 influenza causes individuals to
determines changes in demand. buy influenza vaccines. The demand
speculations
for vaccines would also decrease if the
spread of the disease is reduced. The
demand curve will be shifted to the left
in this case.
Population Population size influences demand, An increase in the number of families in
as income does. Growth in the Metro Manila results in greater demand
population means a growth in for goods, like bread, even if the prices
market demand and a fall in do not change.
population leads to a decrease in
demand.

Therefore, all determinants above affect the shifting of demand either to the right or to the
left. In figure 3 and 4 described the effect of the shifting to the quantity demanded.

A shift of the Demand Curve to the right or

an increase in Demand.

A shift of the Demand Curve to the left results

in a decrease in demand. Figure 2

Figure 3
In addition to demand, there is another relationship center which affects price
and quantity and this is Supply. This refers to seller’s willingness to produce and sell goods
at different possible prices. Since the manufacturers or sellers are looking for more profit, we
can therefore say that the price and quantity supplied have a relationship based on the Law

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of Supply. If the price of a particular product is high, then the quantity supplied or the amount
that producers would be ready to sell is also high, given all the other factors that are
constant.

Shown below is the quantity of corn (in kilogram) a seller is willing to sell at a
given price (in peso). We can see that the seller is willing to sell 200 kilos at ₱40.00/kilo and
that the seller will increase the supply by 100 kilos if price increases to ₱60/kilo and
subsequently increases the supply by 100 kilos for every ₱20 increase in price per kilogram
of corn Price

Point Price Quantity 80 Supply

(Php) (kg)
F 20 100 60
G 40 200 40 G (200,40)

H 60 300 20 F (100,20)
I 80 400 40 100 200 300 400
J 100 500 500 Quantity
FIGURE 4. Supply Curve for Corn

TABLE 2. Supply Schedule for Corn

Thus, the proportionate change in price and quantity or the slope of Supply Curve
can be computed using the formula below:

Change∈P P2−P1 Let’s use the table 2 at Point F and G.

Slope of Supply= ∨
Change∈Q Q2−Q1 40−20
Slope of Supply=
Where: 200−100
P – Price; Q – Quantity 20
Slope of Supply=
100
Slope of Supply=0.2

Interpretation:

Thus, using Point F and G where the Price is P40.00 and P20.00 and the quantity
is 100 kg and 200 kg, in every change in the price of supply, there is a
proportionate change in quantity supply by 0.20.

Let’s us understand how the Law of Supply works.

Ceteris Paribus, (All things held constant) 4

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As Price _________________, Quantity Supplied________________
As Price _________________, Quantity Supplied________________
 Therefore, all determinants above affect the shifting of supply either to the right or to
the left. In figure 5 and 6, described the effect of the shifting to the quantity supplied.

A shift of Supply Curve to the

right increases quantity.

A shift of the supply curve to the Figure 6

left decreases quantity

Figure 5

Figure 5 describes that if the supply curve shifts to the left, the effect in
quantity supplied tends to decrease while in Figure 6 if the supply curve will shift to
the right, the effect in quantity supplied tends to increase.
A change in price determines the quantity provided. However, there are other factors
that also affect supply that caused the supply curve shifts to the left or to the right. This
refers to the shifts in supply and its determinants.

The table below illustrates the different determinants, effects and example.

Determinants Effect Example

Prices of inputs or If one or more input to price Ten years ago, screen phone cost around
cost of producing the decreases, the supply curve P25, 000.00 but now, because of its lower
good shifts to the right because it is input and production costs, its
cheaper to produce the said approximated cost is P4, 000.00 only.
product.
Technology Efficient production through the During 1980s, a printing press could
use of state-of-the-art equipment generate php1 to php2 telephone cards
shifts the supply curve to the depending on the color used. The
right because of an increase in "typeset" was used and the operator
output. manually put the blank cards one by one
until the whole set was complete. Today,
you can print out your own calling cards
using a computer and printer easily
because the process is done more rapidly

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 and efficiently.
TaxesFigure
and subsidies 100 Sin
7. Combining 100
Supply
taxes200add
and 300to400
Demand 500
Curves
the cost and
of Equilibrium
Smoking Point
cigarettes is more costly in
80 producing cigarettes, spirits and Singapore than in the Philippines because
liquors, which will shift the Singapore has strict cleanliness and
60 supply curve to the left. On the health legislation which make the
other hand, subsidies and tax cigarettes expensive.
40 exemptions shift the supply
curve to the right.
20
Number of sellers or If firms decided to increase their Food Stalls are now called "fads". In
firms in the industry size or added more stores or “Shawarma” and Milk Tea stalls, people
outlets, then this will, in the long lined up to taste these products, this
run, shift the supply curve to increased their popularity. As a result,
the right. businessmen begin to raise the number of
stalls to supply the products to those who
would like to try.

Therefore, any shifting of supply curve will depend on the factors that may affect the
changes of determinants aside from price and quantity.

Now, how can the price become stable with regards to the consumer demand and
the supply of the seller? In economics, equilibrium is the state in which market supply and
demand balanced each other, and as a result, prices become stable.

Let us analyze how to determine the Equilibrium Point.

For example,

Demand Schedule of Corn Supply Schedule of Corn

Point. Price Quantity Point Price Quantity
A 80 0 F 20 100
B 60 100 G 40 200
C 40 200 H 60 300
D 20 300 I 80 400
E 0 400 G 100 500
Table 3: Demand Schedule Table 4: Supply Schedule

1. What have you observed with the demand schedule of corn and the supply schedule
of corn?

2. Have you find any similarities as to the price and quantity for each schedule?

Combining the table 4 and 5, we can get the Equilibrium Point or point of intersection of
demand and supply curve at Point C (Demand Schedule of Corn) and Point G (Supply
schedule of Corn) where P=40 andQ=200. Such Price and Quantity are the Equilibrium
point of the demand and supply curve.
Price
Demand
Figure 7. Establish the equilibrium or point of
Supply intersection of demand and supply curve at Point C
– Demand Schedule (200,40) and Point G- Supply
Schedule (200,40)

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 Point C- (200,40)
Point G- (200,40)

Quantity

Let us solve the equilibrium price using mathematical equations, considering the
given demand function and supply function.
Demand Supply

P=a−mdQd P=a+msQs
Where :
P is the price.
Where :

a is the intercept if Qs is zero.

P is the price.

ms is the slope of the supply curve

a is the intercept if Qd is zero.

Qs is the quantity supplied

md is the slope of the demand curve
Qd is the quantity demanded

Referring to demand schedule for corn and supply schedule for corn, we can
substitute the values of the slopes and the intercepts.

Change∈Price Change∈Price
Slope of Demand = Slope of Supply=
Change∈Quantity Change∈Quantity
60−80 40−20
Slope of Demand = Slope of Supply=
100−0 200−100
−20 20
Slope of D= Slope of S=
100 100

Referring to Table 3 and 4 and Figure 7, we can substitute the values of the slopes and the
intercepts.
Given:
Formula of Demand and Supply Function a=80(intercept if Qd is0)
P=a+msQs md=0.20(Slope of demand curve)
P=a−mdQd ms=0.20(Slope of supply curve)
a=0(intercept of Qs)
P=0.2Q(supply function)
P=80 – 0.2 Q(demand function)
Using the given equations above, we can now solve forQ . As quantity demanded at Price P
is equal to Quantity Supplied at PriceQ . (Qd=Q

0.2 Q=80−0.2 Q To solve for P or price, we simply substitute values for

0.2 Q+0.2 Q=80 either the demand function or the supply function.
0.4 Q=80
Q=80÷ 0.4 P=0.20(200) or P=80 – 0.2(200)
Q=200 Is the equilibrium P=40 P=40
quantity.
LET’S TRY ANOTHER PROBLEM!!

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 The demand curve for the bottle of water is Qd=100−6 P and the supply
curveQs=28+3 P . What is the Equilibrium Price?

At the equilibrium Qd=Qs Let us now substitute in demand equation.

Thus we can say:
Qd=100−6 PQd=100−6 ( 8 )Qd=100−48Qd=52.
100−6 P=28+3 P
100−28=3 P+6 P Let us now substitute supply equation.
72=9 P Qs=28+3 P Qs=28+3 ( 8 )Qs=28+24Qs=52
9 P 72
=
9 9
P=8 Aside from Equilibrium where the supply and demand are balanced, there are also a
surplus, shortages, and government interventions that affect the demand and supply. In a
competitive market, a surplus or a shortage may occur when there are movements or
The equilibrium
changes within thePrice=
same₱8.00
supply and demand schedule.

Whenever the government sets a price

floor which is above the Equilibrium
Price, it may result into SURPLUS. For
example, if the government sets a
price floor for Palay (rice that has not
been husked) at P2, that is higher than
P1, then there would be suppliers who
are willing to produce and sell the said
commodity. But since quantity
demanded is lower and quantity
supplied is higher thus, results to
surplus.

Figure 8. Setting A Price Floor Resulting in Surplus

On the other hand, a shortage occurs when the quantity demanded exceeds
the quantity supplied. This happens when the price is below the equilibrium level.
When a shortage exists in the market, the consumers cannot buy as much of the
goods as they would like. A shortage may also be experienced if government sets a price
ceiling below the equilibrium price
Example: On a regular market, the price of a kilo of rice is P35.00 however, due to
pandemic the government ordered to set the price ceiling of rice at P25.00, what do you
think would happen to the supply of rice?

The notion could be the suppliers are willing to sell 20,000 kilos of rice at P35 and he
is willing to sell only 10,000 sacks of rice if the price is P25.00 as regulated by the
government as price ceiling.

The seller is willing to provide

10,000 kilos of rice if the Price
is P25.00 based on the
government ceiling price.
Thus, there would have a
shortage of 20,000.00 kilos of
rice in the market.
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What if the current demand for rice is 30,000 sacks?

This results to a shortage of 20,000 (30,000-10,000) sacks of rice that cannot be

served to the market.

Q S >Q D=Surplus
Q S <Q D=Shortage

Price regulation is quite important in a market economy. Say for instance, after a
calamity comes food shortage. Price regulation is essential to stabilize supply at a controlled
price ensuring balance between the demand and supply.

Therefore, whenever the government sets a price floor which is above the
equilibrium price the result is a surplus, because the seller is willing to produce
more because of higher price.
Whenever the government sets a price ceiling below the equilibrium price
the result would be a shortage because the seller is not willing to produce more
because the price is cheaper.

Let us Illustrate!
In the terminal station selling chocolates ,supply is Qs=−20+50 P and Demand is
Qd=100−30 P , where the quantity is in chocolate per week and the price in peso per
chocolate.
a. Make a table showing quantity supplied and the quantity demanded at each of the
following prices:

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 P 1.00 , P 2.50 , P 0.80 , P 2.00 , P1.20 , P 1.50 .

Equilibrium :Qs=Qd

−20+50 P=100−30 P Qs=−20+50 P Qd=100−30 P

120 Qs=−20+50 ( 1.50 )Qs=55 Qd=100−30 ( 1.50 )
50 P+30 P=100+20 P= Qs>Qd=Surplus
Computation80 Qs * Computation Qd Qd=100−45Qd=55
Price
P=1.50
Qs=−20+50 P Qd=100−30 P ** Qs<Qd=Shortage
Qs=Qd=Equilibrium
Shortage 40, price
1 Qs=−20+50(1) 30 Qd=100−30 (1) 70
ceiling

2.50 Qs=−20+50(2.50) 105 Qd=100−30 (2.50) 25 Surplus 80,price floor

Shortage 56, price

0.80 Qs=−20+50(0.80) 20 Qd=100−30 (0.80) 76
ceiling

2 Qs=−20+50(2) 80 Qd=100−30 (2) 40 Surplus 40,price floor

Shortage 24, price

1.20 Qs=−20+50(1.20) 40 Qd=100−30 (1.20) 64
ceiling

1.50 Qs=−20+50(1.50) 55 Qd=100−30 (1.50) 55 Equilibrium=0

¿ Qs=Quantity Supplied
** Qd=Quantity Demanded

II. LEARNING COMPETENCIES

 Analyze market demand, market supply and market equilibrium.

III. ACTIVITIES

A. TRY ME
1. Find the slope of demand using Point K and L and prepare a graph.

Point Price Quantity

K 1,000 0
L 800 2
M 600 4
N 400 6
O 200 8
P 0 10
1,000

800
Change∈ P P2−P1
Slope of D= =
600 Change∈Q Q2−Q1
400 Slope of D=¿ ¿
200

0 2 4 6 8 10

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 2. Based on the result of of slope of demand, how would you describe the relationship
between the quantity versus the price?

B. Match Me!
Match the descriptions with the determinants and explain the reason/s why the
determinants match with their descriptions.

Determinants Description

_____1. Income a. Shifting of demand to the right

_____2.Population b. People loves to used iphone

c. Balik Probinsiya Program of the
_____3.Taste and Preferences
Government
_____4. Price related to substtitutes and
d. Shifting of demand to the left
complements
e. Due to pandemic a lot of people lost their
_____5. Change in Speculation
job
_____6. Increase in Demand f. Due to pandemic the stocks went down
g. The price of bread went high, the
_____7. Decrease in Demand
demand of peanut butter decreases.

C. Apply Me!

Answer the following by applying the concept of demand determinants. Write

your answers in your answer sheet.

1. Do you have a specific brand choice for a particular product? Why are you buying a
particular brand? What will you do if the price of that particular brand changes? Will
you still use this product even if your family income falls?

2. Give at least 2 real-life scenarios wherein you can apply the concept on factors
affecting demand.

D. Solve Me!

1. Find the slope of the supply curve using Point C and D and prepare a graph.
(Answers to this activity are given in the Answer Key.)

Point Q P
A 0 30
B 10 35
C 20 40

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 70

60

50
D 30 45
40
E 40 50
F 50 55 30
G 60 70 0 10 20 30 40 50 60

2. Based on the result of of slope of supply, how would you describe the relationship
between the quantity supplied versus the price?

E. Let’s Check What you Know!

Answer the following.
a. If you are a seller, how will you compete your product you are selling to sellers? Give
instances that the seller can shift his/her supply curve to the right which means an
increase in quantity supplied.

b. Give at least 2 real-life scenarios wherein you can apply the concept on factors
affecting supply.

F. Find Me!

Find the slope of the supply and the equilibrium price and quantity using Point
(C, D) and Point (G,H).
1.)
Point Price Quantity Point Price Quantity
A 100 0 F 20 100
B 80 200 G 40 200
C 60 400 H 60 400
D 40 600 I 80 600
E 20 800 J 100 800

Demand Schedule of Bread Supply Schedule of Bread

G. Fill out the table below, given following list of prices above.
From each of the above prices, solve the amount of the surplus or shortage and
determine if the market is a surplus( price floor) or shortage (price ceiling).

Qs>Qd=Surplus
Price
Computation Qs Computation Qd Qs<Qd=Shortage
Qs=10+ 40 P Qd=120−20 P
Qs=Qd=Equilibrium
2

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 6

10

IV. RUBRIC FOR SCORING

CRITERIA Extent of Work Performed Points

5 4 3 2 Earned
Content Appropriate Appropriate Appropriate Appropriate
content is content is content may content is not
used for each used for each be used. observed.
challenge challenge Student shows Student does
problem. problem. little not
Student Student shows understanding demonstrate an
clearly some of the understanding
understands understanding mathematical of the
the of the concepts. mathematical
mathematical mathematical concepts.
concepts. concepts.
Organizatio The challenge The challenge The challenge The challenge
n problem is problem is problem is not problem is not
written in written in clear written in in written in clear
clear and and coherent clear and and coherent
coherent language. It is coherent language, or
language. It is easy to read language. It is may not be
easy to follow most of the easy to follow observed. It is
and read. time. and read some difficult to read
of the time. and follow.
Mechanics Proper Proper Proper Proper
language, language, language, language,
capitalization capitalization capitalization capitalization
and and and and
punctuations punctuations punctuations punctuations
are present are present may be used, are not
with no with one to two but more than observed.
mistakes. mistakes. two mistakes.

V. REFERENCES
Manapat, C.L. Applied Economics for Senior High School. (C & E Publishing, Inc., 2018)

Law OF Supply and Demand. https://www.investopedia.com/terms/l/law-of-supply-demand

Hamblin James (2013). Example Supply and Demand. Youtube. July 16, 2013.
https://www.youtube.com/watch?v=ZHczhRKryoA.

Tutor 717. Economic Basics: Finding Equilibrium. Youtube. February24,2012.

https://www.youtube.com/watch?v=qTRNU_b4iww

Zyl,Cecilia Van. Calculation of equilibrium quantity and equilibrium price. Youtube.

https://www.youtube.com/watch?v=z6IuXGgbcw0
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 Development Team of Learner’s Packet

Writer: Roselle P. Collantes-Panganiban National High School,CC

Illustrators & Layout Artists:
Jhon Paulo M. Gianan – Catanduanes National High School
Javine M. Tolledo – Catanduanes National High School
Language Editors:
Ma. Elena V. Carullo - Panganiban National High School,CC
Anne Marionne A. Osila – Catanduanes National High School
Content Editors:
Jezrahel T. Omadto – CID- EPS- Mathematics
Carol P. Gil – MT I / OIC ASP II Catanduanes National High School
Shinette T. Oliveros – Teacher II Catanduanes National High School

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